In the Chesapeake case, the Texas Supreme Court upheld previous court rulings that the payment of “cost-free” royalties could not include deductions for post-production costs. Chesapeake Exploration, LLC argued that “cost-free” meant free from production costs, not post-production costs.

The Burlington v. Texas Crude case involved similar language in an overriding royalty arrangement. Using the Supreme Court’s ruling in Chesapeake v. Hyder, the Appellate judges held that the higher court had set out the interpretation of such an overriding interest language. Like Chesapeake, Burlington could not deduct post-production costs from an overriding royalty payment.